Barry Russell Quoted by Euromoney on Historic Icelandic Bank Failure and Restructuring

For its article “The secret heroes of Iceland’s banking resolution”—the first of two installments—Euromoney quoted Akin Gump financial restructuring partner Barry Russell, as it traces the path of the bank failure—described in the article as the third largest in history—that almost toppled Iceland’s economy and the role of key individuals in bringing that country back from the edge.

Russell, who, over seven-and-a-half years, was one of the key players in the restructuring of the Iceland’s “big three” banks (or “estates”), spoke to the inadequacy of Iceland’s legal framework at the time: “One of the issues was that there was a distinct lack of legal and financial infrastructure. The Lehman collapse was big and complicated, but at least there was Chapter 11 to help deal with it. In Iceland there was nothing of the kind. I found it very daunting because, although I knew the banks had assets, at the time there was not even a mechanism for the government and the banks to interact with creditors.”

Russell’s skill in managing this multiyear negotiation to resolution is lauded by a lawyer closely involved in the restructuring process, who is quoted as saying, “I thought it was most admirable that somehow Barry Russell managed to keep together all of the creditors in three different estates together.”

The second installment, “The carrot and stick that completed Iceland’s banking resolution,” reveals how the crisis, after many seemingly insurmountable problems, came to a resolution.

Russell spoke of the stalemate that developed between creditors and the government of Iceland, recalling his surprise and exasperation that the prime minister refused to open a dialogue with him or the parties he was representing for more than a year.

“We spent the whole of 2013 and most of 2014 trying to engage,” Russell said. “We were making phone calls and sending e-mails that were ignored, and presenting proposals that met with no response.” Finally, a task force on capital controls was established that would lead to dealing with the problem of the so-called krona overhang, whereby the banks had huge liabilities toward foreign creditors and assets in Icelandic krona.

As the crisis drew to a close, Russell said the wait for a resolution had been much longer than he expected, but it was worth it. “The clients we represented had more than $30 billion of claims at the last count,” he said. “At last, they were able to start realizing value from their holdings. Had the bank estates gone into complete liquidation, which was the alternative, a lot of people would have lost a lot of value.”